Encouraged by Federal Aid, U.S. Firms Set to Jump-Start an Industry for Electric-Car Batteries

By Steven Mufson
Washington Post Staff Writer
Saturday, July 25, 2009

The Energy Department is getting ready to hand out about $2 billion in grants to create a domestic industry for electric-car batteries, and 122 companies are scrambling to get pieces.

The companies range from small niche firms to giants such as Dow Chemical and Johnson Controls. All are promising a combination of innovation and ability to deliver new products on a commercial scale to prevent the United States from trading dependence on foreign oil or reliance on foreign-made batteries.

"We've had 20 years of bad behavior in the United States in terms of developing ideas into products," said Mary Ann Wright, chief executive of Johnson Controls's joint venture developing hybrid battery systems.

Now policymakers hope that helping domestic battery manufacturers will produce economic savings that often come with large-scale production and which are needed to make electric cars affordable. With funds provided by the stimulus bill in February, the Energy Department can cover up to half the cost of a battery-related project.

"This investment will not only reduce our dependence on foreign oil, it will put Americans back to work," President Obama said in March. "It positions American manufacturers on the cutting edge of innovation and solving our energy challenges."

The federally funded battery effort has its skeptics. Grants are expected to focus on lightweight lithium-ion batteries similar to those found in laptops. They are the newest thing in a business that had not changed much since lead-acid batteries were invented a century and a half ago.

But U.S. hopefuls face stiff competition from foreign firms such as Japan's Panasonic and Sony, and South Korea's LG Chem, which already dominate the lithium-ion battery market in power tools, laptops and cellphones. Some domestic firms have recruited foreign companies as partners in new U.S.-based manufacturing facilities.

Moreover, some economists warn of the perils of government subsidies. "To the extent that this is part of a broader industrial policy scheme, I'm against it for all the reasons I've always been against it," said Charles Schultze, a Brookings Institution senior fellow and former chairman of the Council of Economic Advisers. "If you're not heavy-handed about screening [applications], you're going to get a lot of the equivalent of political pork."

Some industry experts also note that lithium-ion batteries may not be ready for tough road conditions, that they generate a lot of heat and that there is no infrastructure for recycling them. For the moment, it is easier to recycle lead-acid batteries, like those in combustion-engine cars, or nickel-metal hydride batteries, like those in the current generation of hybrid vehicles.

Nonetheless, Obama has set a goal of having 1 million electric cars on the road by 2015 and the Energy Department is trying to make sure a large share of them are powered by U.S.-made batteries. In addition to the $2 billion in grants it is expected to announce soon, the Energy Department can also lend from a separate $25 billion program. It has already announced a $1.6 billion loan to help Nissan develop an electric car, including the construction of a new battery plant, and a $465 million loan for Tesla Motors, part of which would go to a battery-pack facility that would stock Tesla and Daimler.

Here's a quick look at some of the companies, big and small, that hope to benefit.

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